Case Study 7: From Defense Management, GAO-14-82, December 17, 2013

In 2006, the United States and Japan planned to relocate 17,600 U.S. Marines and dependents from Japan to Guam. However, in 2012, representatives from the countries developed a revised plan under which 6,300 Marines and dependents would relocate to Guam.

Some investments had been made to improve Guam’s public infrastructure, but many deficiencies and regulatory compliance issues continued to exist. The reliability, capacity, and age of much of the public infrastructure—especially the island’s utilities—indicated a need for additional upgrades to be able to meet current and future demands related to the realignment. Further, some infrastructure sectors, such as water and wastewater, faced issues complying with federal regulations. Other sectors, such as the fire and police departments, were experiencing staffing and other shortages that affected their ability to serve Guam’s population.

Despite the reduction of Marines and dependents relocating to Guam, DOD had not yet revalidated the public infrastructure requirements based on the revised realignment plan or differentiated between requirements needed to address long-standing conditions and those related to the realignment. This revalidation was not expected to be completed until 2015. Even so, DOD had requested over $400 million for Guam public infrastructure projects in its budget requests since fiscal year 2012. It was unclear if all of these projects were necessary to the same extent given the reduction in forces. For example, if DOD decided to locate the Marines on the naval base that handled all of its own water/wastewater needs, public water/wastewater improvements would not have been needed to support the Marines. Congress had placed limitations on the use of funding, in part until certain information was provided related to the realignment. Without revalidating and differentiating between requirements, DOD could not clearly identify what Guam public infrastructure requirements were needed to directly support the realignment.

The $1.3 billion cost estimate for improvements to Guam’s water and wastewater systems that DOD had used to support budget requests for fiscal years 2013 and 2014 was not reliable. GAO assessed that the estimate minimally met the best practice criteria for three of the four key characteristics—comprehensive, well documented, and accurate—for a reliable cost estimate as identified in the GAO Cost Estimating and Assessment Guide and did not satisfy best practice criteria for the fourth characteristic of being credible. GAO determined that officials adhered to some best practices for a reliable estimate but did not, for example, include all relevant costs; sufficiently explain why certain assumptions and adjustments were made; incorporate actual costs or inflation adjustments; or adequately address risk and uncertainty.

GAO recommended that, to provide DOD and Congress with sufficient information regarding the requirements and costs associated with DOD’s Guam realignment plans and the public infrastructure necessary to support that realignment, the Secretary of Defense should direct the Department of the Navy’s Joint Guam Program Office in concert with the Office of Economic Adjustment to, as future cost estimates for Guam public infrastructure projects are developed, fully incorporate the best practices identified by GAO for developing high-quality cost estimates. As a result of GAO’s recommendation, in August 2015 DOD followed the standards set forth in GAO’s Cost Estimating and Assessment Guide and revised its cost estimates for public infrastructure needs on Guam. In doing so, DOD reduced its estimate and future budget requests.

GAO reported its findings on December 17, 2013 in Defense Management: Further Analysis Needed to Identify Guam’s Public Infrastructure Requirements and Costs for DOD’s Realignment Plan, GAO-14-82.